Saudi Aramco is in talks to buy a minority equity stake in Shandong Yulong Petrochemical (Shandong Yulong) to further boost its investment in China.

The energy major has signed a memorandum of understanding (MoU) with Nanshan Group, Shandong Energy Group and Shandong Yulong.

Aramco said the agreement aims to facilitate discussions for the potential acquisition of a 10% stake in the Chinese petrochemical company.

Currently, Shandong Yulong is constructing an oil refining and petrochemicals complex at Longkou in Yantai City, Shandong Province.

The facilities are designed to process roughly 400,000 barrels-per-day of crude oil and produce a significant amount of petrochemicals and derivatives.

Under the terms of the MoU, Aramco has agreed to supply crude oil and other feedstock to Shandong Yulong.

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By GlobalData

Through the deal, Aramco expects to expand its worldwide downstream operations.

Aramco downstream president Mohammed Al Qahtani said: “As one of China’s largest refining and chemical centres, Aramco values Shandong for its current strength and future prospects. We believe this collaboration has potential to enable all parties to contribute to China’s energy security and development, and aid in navigating the energy transition.

“With Aramco’s long track record as a reliable supplier of energy to China, and the expertise and commitment of Shandong Province, we envision a prosperous future together.”

The deal is subject to regulatory approval, negotiation of the transaction agreements and due diligence.

Last month, Aramco signed a similar agreement with Jiangsu Eastern Shenghong to invest in its petrochemical subsidiary, Jiangsu Shenghong Petrochemical Industry Group.

Aramco’s efforts to expand in China come close on the heels of its $500m (SR1.8bn) investment in liquefied natural gas (LNG) company MidOcean Energy.

Following the MidOcean Energy deal, Aramco upstream president Nasir Al-Naimi said the company is exploring more deals in LNG and other areas.